LEAN Hybrid Being Implemented into Supply Chains

Key Takeaways:

• LEAN raises productivity and provides a safe warehouse workspace.
• There are five key principles for to successfully implementing LEAN
• A 3PL partner can be a critical ally to successful LEAN warehousing

The pandemic has made a lasting impact on warehousing. Before COVID-19, LEAN warehousing was the rule, not the exception. But as consumer spending grew from 2020-2023, supply chains simultaneously experienced a perfect storm of troubles, resulting in many items being backlogged or out of stock entirely. Businesses compensated by putting traditional LEAN practices aside and overstocking.

As we head further into 2024, spending seems to be moderating, despite rising interest rates and lingering inflation. December retail sales in the U.S. rose 5.6% over the previous year, the largest jump since early 2023, but smaller than the prior two years. Likewise, warehouse managers are returning to a “just-in-time” inventory management strategy, departing from the “just-in-case” pandemic-era philosophy.

As companies readjust to this new normal, they find themselves working through several issues:

• Too much warehouse space, after expanding to accommodate pandemic demand
• Finding that “Goldilocks” mix of LEAN vs abundance
• A lack of visibility into inventory and warehouses

In this article, we will walk through the ins and outs of LEAN warehouse management. We’ll also cover the benefits of outsourcing to a 3PL vendor, providing flexibility, resilience, with reliable technology and infrastructure in place for real-time visibility.

A brief history of LEAN

LEAN warehouse management optimizes operations with systematic improvements to productivity and efficiency. Its prioritizes reducing lead times, cutting waste, and boosting customer satisfaction. LEAN allows companies to cut costs by streamlining warehouse processes.

After Henry Ford’s assembly line took the production world by storm, Toyota’s Kiichiro Toyoda and Taiichi Ohno applied simple innovations to produce continuity in process flow and wider product variety. Thus, the Toyota Production System (TPS)—the modern predecessor to LEAN—was born, which shifted focus from how individual machines were used to how product flowed from beginning to end.

Toyota achieved low cost, high quality, high variety, and quick throughput times that delivered products adapted to changing customer preferences. This process included right-sizing machines to fit the company’s required volume, ensuring quality with self-monitored machines, putting machines in order of process sequence. Many other innovations achieved new levels of efficiency and customer service.

Ryder’s supply-chain solutions team has been using LEAN business systems for decades to optimize supply-chain, warehousing, and logistics efficiency. Ryder proactively sought Kaizen” initiatives – a Japanese term for continuous improvements – by enhancing such practices as yard-cost savings, customs compliance, and general process enhancements. Toyota recognized Ryder’s contributions to its efficiency by bestowing its Innovation Award at its 2023 Supplier Conference in Grapevine, Tex.

The benefits of LEAN

The U.S. warehousing market, once booming, now sees signs of contraction. Businesses are moving back to a LEAN philosophy, consolidating warehousing operations and upgrading their existing facilities rather than building new ones. At the same time, retailers are recovering from a long inventory drawdown and adjusting supply chains to pre-pandemic levels, reflecting current consumer spending habits.

There are many key benefits of this LEAN warehousing renaissance:

• Higher productivity: LEAN warehousing helps minimize wasteful processes like excess inventory storage and overproduction, with productivity rising when these mistakes are corrected
• Safer workplaces: LEAN practices rely on warehouse automation to eliminate workers reaching very high or low for inventory, reducing clutter and keeps employees safe.
• Happier employees: LEAN principles increase staff involvement in day-to-day decisions and provides a feeling of empowerment. This leads to higher retention rates and motivation
• Less downtime: As warehouse processes become more efficient, operations improves and downtime decreases
• Reduced storage: Rather than moving to a larger facility, LEAN allows management to optimize inventory levels and reduce excess stock. This avoids cost increases that accompany warehouse expansion or leasing a new facility

Now that we’ve walked through the benefits of LEAN, let’s address five key principles.

The key principles of LEAN

There are five essential principles foundational to all LEAN practices, including warehousing. Taken together, they enable safe, organized, and efficient warehouse work environment.

• Sort: Everything in the warehouse must be thoroughly vetted to make sure it provides value to the organization. Anything redundant, out of date, or unused should be removed
• Set: Store items in proper locations according to usage, so they’re immediately available
• Shine: A clean, organized warehouse is productive and profitable. This minimizes congestion and ensures efficiency
• Standardize: Maintain efficiency with consistent guidelines, procedures, and processes
• Sustain: Consistently maintain the previous four principles to establish a culture of continuous improvement

Ongoing training and encouragement establishes and maintains these five LEAN principles. Your warehouse managers will be able to confidently apply them, and your staff will feel empowered to achieve the highest possible standard.

Three tips to effectively implement LEAN

New warehouse space remains at a premium. New leasing activity grew by 14.8% in the fourth quarter of 2023, a positive sign even though that was down 9% from the same quarter last year. Below are three techniques to effectively implement LEAN:

• Conduct an assessment: One way to do this is with value-stream mapping (VSM), which allows companies to visualize the manufacturing process from start to finish to stop cost overruns and use efficient manufacturing systems
• Set objectives: Clear, measurable goals are necessary to achieve your LEAN warehousing goals, including lowering processing times and improving inventory turnover
• Develop standard practices: Standardization helps to boost efficiency and productivity by setting up consistent processes, guidelines, and procedures.

The marriage of LEAN and technology

Technology is key to setting up and maintaining a LEAN warehouse. Robotics, automated guided vehicles (AGVs), and warehouse management systems (WMS), help improve efficiency and reduce waste. AGVs and robotics can automate repetitive tasks which leads to fewer errors, and a WMS helps optimize order picking and inventory tracking.

Some of these innovations include:

• Warehouse automation: Supply chains are automating rapidly. Experts anticipate robot shipments to grow by up to 50 percent each year through 2030. Automation helps companies address challenges filling vacant positions, improve fulfillment quality and safety, and take full advantage of warehouse space
• Inventory management: A WMS lets businesses keep careful watch over any item that passes through their facility, allowing inventory to leave warehouses faster and with greater accuracy
• Real-time data analytics: With data at your fingertips, you can optimize warehouse operations, collect data from multiple sources, and more accurately predict demand

Consider outsourcing to a 3PL

While you may have the ambition and vision to imagine a future with LEAN warehousing, you may not have time to implement it. Enter a 3PL partner who has the experience and knowledge of best practices to take your vision and do the work of putting it into action.

A 3PL has an extensive LEAN management background, with flexible strategies that adapt to ever-changing customer-spending habits. It also has preexisting real estate and infrastructure to provide an optimized warehouse space that can help lower overhead costs. Finally, a 3PL has advanced technology platforms that can incorporate your existing systems. This allows instant real-time inventory access, allowing more informed decisions.